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Raymond James Downgrades Iridium Communications On New Valuation Model

Iridium Communications Inc (NASDAQ: IRDM) commenced its NEXT satellite services in early February and already has hundreds of subscribers on the new network. The company can grow revenue, EBITDA and FCF by adding new NEXT products and services, according to Raymond James.

The Analyst

The Thesis

The downgrade is due to a shift in valuation methodology, but still reflects the company's investment in Aireon, Prentiss said in a Wednesday note. (See his track record here.)

After completing the NEXT constellation launch campaign earlier this year and with the enhanced mobile satellite services contract from the U.S. government likely to be renewed in May, the company is considering options to refinance its debt to a more flexible facility, the analyst said.

Iridium is likely to shift refinancing in the back half of 2019 from the construction phase credit facility to operational phase debt, Prentiss said.

The credit facility could be replaced with $1.4 billion of debt at a 6.75-percent rate by the end of the second quarter, and the $360-million high-yield debt may be taken out in the second quarter of 2020, the analyst said. The company is likely to use the debt capacity to repurchase shares, he said.

Price Action

Iridium Communications shares were falling by 5.3 percent to $26.63 at the time of publication Wednesday.